Yale economics professor Robert Shiller is drafting a pivotal lecture and running out of time. In less than a month, he and other Nobel laureates will travel to Sweden to deliver their talks before the December 10 prize ceremonies.

Reuters

Robert Shiller

“I have little time to do it and lots of interruptions,” Mr. Shiller said last week, about the frenzy ignited by the award.

The festivities in Stockholm aren’t just a matter of meeting King Carl XVI Gustaf and flying home. “I’m going to be there for two weeks!” Mr. Shiller said. “I have 16 friends and relatives coming with me. It’s like a wedding. I have to rent a tuxedo.”

In October, Mr. Shiller and the University of Chicago’s Eugene Fama and Lars Peter Hansen were cited by the Royal Swedish Academy of Sciences for “their empirical analysis of asset prices.” The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel will be presented in Stockholm.

On a recent morning at Yale’s Cowles Center, in a late 19th-century former residence beside the school’s economics department, Mr. Shiller fielded a stream of phone calls as well as congratulations from graduate students.

In his office, books—including many of his own works—spilled over shelves on to the floor by the fireplace near his desk. Mr. Shiller, who is 67 years old, joined the Yale faculty in 1982. He is the Sterling Professor of Economics, a named position that is the university’s highest academic distinction.

He is a creator of the Standard & Poor’s/Case-Shiller Home Price Index, which tracks changes in residential values across the U.S. Mr. Shiller is at work on another book with George Akerlof, husband of Janet Yellen, who has been nominated for the top spot at the Federal Reserve. Next year he will teach an online introductory course in financial markets through Coursera. The lectures are far from ready, he says, admitting, “I have so much work to do.”

Here are excerpts from the interview:

On the most recent economic crisis: “It’s really embarrassing to the economics profession that this crisis was hardly predicted. There are a few people, I count myself among them, who warned of this crisis…but it makes you wonder about … [economic] models…..I wrote a couple of papers with Ray Fair here at Yale evaluating forecasting models…And we found that they do forecast somewhat, but not very far out….It seemed like the models aren’t very good at seeing major turning points.”

On whether uncertainty hinders business investment and growth: “We have to be careful about what John Locke called ‘taking words for things.’ We have one word ‘uncertainty’ but it has many meanings. In the breakup of the Soviet Union in 1991, there was enormous uncertainty and yet, that was stimulating. This was a gold rush time, when we could stake our claim and do all sorts of things… Traders love uncertainty, maybe entrepreneurs love it especially. You’re thinking differently, you know that the government might step in with some new regulation and so you’re gaming that.”

On the potential Fed stewardship of Janet Yellen: “I can’t read her mind, but she seemed to me a very sympathetic person. Right now, unemployment is the prominent problem, but if there ever were substantial inflation, that would hit a lot of people unfairly. You know, a lot of retired people are living off fixed incomes and you can’t just let them down. My sense of Janet is that she wouldn’t ever do that.”

On the housing market: The S&P/Case-Shiller “numbers went up 12.8% in the last year, so it’s going up at a pretty good clip. But it might well slow. Part of it is that the initial impact of very low mortgage rates is still with us but they’ve gone up. Mortgage rates have gone up a lot and they might go up with tapering.”

On investors v. traditional home-buyers: “We’ll see how these … investors are going to manage buying single-family homes. And they may decide that this was a mistake and dump them. Homebuyers are very inertial. They stay in a place for years and years, but we have a new dynamic element in all these professional investors and something like half of all sales now are cash sales. It’s not the same market. The same kind of people who pay cash seem to me people who might sell more quickly.”

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